While the federal government has taken a variety of different positions in regulating distributed ledger technology, there are several important trends that are emerging in states’ regulation of such technology:
1) States are increasingly scrutinizing digital currencies.
States are moving forward with regulating digital currencies, especially with respect to money laundering. In response to a Florida court ruling, discussed in an earlier Goodwin blog post, which dismissed a state money-laundering case in part because the court found that Bitcoin was not money, Florida’s legislature is considering a bill that would add “virtual currency” to the definition of “money instruments” in an effort to make prosecution of money laundering easier. Likewise, the West Virginia legislature has approved a bill that includes cryptocurrency in the definition of a “monetary instrument” in the state anti-money laundering statute.
Many states are also regulating the transmission of virtual currencies even outside of anti-money laundering statutes. Washington state is one recent example, but this type of regulation is widespread, with one blogger documenting and lamenting widespread state regulation of Bitcoin transactions. One exception to this trend is New Hampshire, which has exempted virtual currency from money transmission regulations. Nevertheless, as one reporter notes: “New Hampshire’s push toward digital currency regulation is unique among efforts in other US states, which have largely seen legislative actions that lean toward more scrutiny of digital currency activities.”
2) States are encouraging distributed ledger technology for contract use.
States are promoting distributed ledger technology for use in contracting. Most notably, Delaware, home to 66% of Fortune 500 companies and 85% of IPOs, has been pushing to adopt distributed ledger technology for use in its corporate record and governance process and expects 2017 to be the year where companies filing paperwork in Delaware may do so using such technology. Likewise, Arizona recently approved use of distributed ledger technology for contracts. Vermont passed a bill allowing distributed ledger technology to authenticate certain court documents, including contracts and timestamps on contracts. Similarly, the Nevada Senate has supported a bill that prevents localities from taxing contracts that use distributed ledger technology, encouraging its use by removing financial barriers to its adoption.
Thus, the trend is for states to welcome and even protect the growth of blockchain technology as it applies to contracts.
3) States are more mixed in promoting distributed ledger technology for other purposes.
Nevertheless, states are more hesitant in adopting distributed ledger technology for other purposes. For example, Arizona, a state that has approved use of distributed ledger technology, is working on passing a bill that would prevent the use of such technology to track firearms. Maine has likewise stopped a study that would look at the potential for using the technology for voting records. Yet at the same time, Illinois announced an initiative to encourage adoption of distributed ledger technology, particularly within the government.
Thus, outside of money and contracts, states are more mixed in promoting or discouraging the use of distributed ledger technology.